Alberta unveils two new energy royalty programs to encourage output

CALGARY, Alberta, July 11 (Reuters) - The Canadian province
of Alberta introduced two new oil and gas royalty programs on
Monday, the latest step in an overhaul of the fees producers pay
to the government to exploit hydrocarbon reserves.
Alberta said the royalty programs its government promised
last year will encourage producers to explore new areas, boost
production and keep people working. A two-year oil price slump
has forced companies to slash billions in capital investment and
lay off tens of thousands of employees.
Industry players meanwhile, welcomed the latest move and
said it would reward higher risk exploration and schemes
designed to maximise oil and gas recovery from older wells.
"These programs serve to recognise the higher risks and
greater project costs of drilling in emerging resource plays and
implementing secondary recovery schemes," Tim McMillan,
president of the Canadian Association of Petroleum Producers
said in a statement.
Alberta's NDP government, elected in a sweeping majority
last year, unsettled producers when it first announced plans to
review oil and gas royalties to ensure the province received its
fair share of hydrocarbon revenues.
However, the new framework unveiled in January was less
radical than some industry players had feared, leaving rates
unchanged on existing wells and oil sands projects, and
alleviated concerns that costs could rise to punishing levels.
The Emerging Resources Program will apply to wells being
drilled in hotly-tipped oil and gas plays in the early stages of
development, and allow producers to pay a flat royalty rate of 5
percent to the government until revenue equals the wells'
program-specific cost allowances.
After that the wells will be subject to normal royalty rates
laid out in Alberta's Modernized Royalty Framework, released in
January.
The second scheme, the Enhanced Hydrocarbon Recovery
Program, is aimed at boosting production from ageing wells,
which usually involves injecting gas or liquids to stimulate
more output.
Producers will be able to pay a flat royalty rate of 5
percent for a benefit period up to a maximum of 90 months.
BMO analyst Randy Ollenberger said in a note the Enhanced
Hydrocarbon Recovery Program will benefit producers such as ARC
Resources ARX.TO , Whitecap Resources WCP.TO and TORC Oil &
Gas TOG.TO , while the Emerging Resources Program should spur
development in areas like the East Shale Basin in Alberta's
Duvernay play.
Both programs will begin on Jan. 1 2017.